Tuesday, October 25, 2011

Across Indian cities, mushrooming malls are driving a revolution in the fast-food business.

By Jason OverdorfGlobalPost - October 25, 2011

NEW DELHI, India — At the DLF Place mall in the upscale South Delhi neighborhood of Saket, shoppers and employees sit more or less side-by-side in a new “desi” food court, digging into traditional Indian dishes ranging from biryani to dosas to seekh kebabs.

There's something for everybody — at many tables three generations are sitting down together. But that's not the reason these traditional upstarts have succeeded in storming what was once the bastion of western brands like McDonald's and Pizza Hut.

Some of the city's most famous restaurants are represented here — some of them a century old — transformed by smart uniforms, cheery signage and shining show kitchens to look every bit as clean, efficient and modern as their multinational competitors. Welcome to the future of Indian fast food.

“[Quick Service Restaurants or] QSRs are quite successful in India,” said Arun Chanda, founder of New Delhi-based Mint Hospitality Consultancy. “Over the last five years, a lot of Indian companies have started getting into the franchising model and expanding into different cities.”

But the revolution is already underway across the country, as global chains seek to woo a broader cross-section of customers by incorporating traditional spices and ingredients into their menus. And local upstarts have begun to attract deep-pocketed financiers in the bid to build nationwide fast-food chains of their own.

“Even people who are into the five-star hotel business are thinking of getting into the QSR concept,” said Chanda.

According to Euromonitor and market-research firm RNCOS, India's $13 billion fast-food market is already growing 25-30 percent a year, and global players like Domino's, McDonald's and Yum Brands (KFC and Pizza Hut) are pushing into second- and third-tier cities.

Hardcastle Restaurants, development licensee for McDonald's in India, is planning a massive expansion, doubling its India stores over the next three years with an investment of $100 million. Meanwhile, Yum Brands plans to open 1,000 outlets — half of them KFC restaurants — on its way to $1 billion in revenue from India over the next four years.

Other multinationals like Burger King, Cinnabon, Dunkin Donuts, and Starbucks are not far behind — with stores already on the ground or aggressive launch plans underway.

With 60 percent of the Indian population currently under 30, it's no mystery why.

Call it irrational exuberance if you want, but this summer Indian investors judged Jubilant Foodworks — which owns the franchise rights to Domino's and Dunkin Donuts in India and sold about $150 million worth of pizzas last year — to be nearly as valuable as the U.S.-based parent company.

“We've now been in India for over 15 years, and we've actually seen the change right before our eyes,” said Amit Jatia, vice chairman of McDonald’s India. "The market is changing very significantly. People are eating out far more often than before, and I think the availability of international QSR brands has brought about that change.”

But as the success of DLF's “desi food court” suggest, the future of fast food in India isn't about pizza and burgers.

In deference to Indian religious sentiments, McDonald's doesn't even offer its signature Big Mac here, or any other beef or pork products. Instead, it offers the Chicken Maharaja Mac and items like the McAloo Tikki burger (a mashup of potatoes and peas, deep-fried and served in a bun), the McVeggie and the Paneer Salsa Wrap — along with the Filet-O-Fish, McChicken sandwich and Chicken McNuggets.

“We believe that we must respect the local culture. Therefore, around the globe we do products that are relevant for the local consumer,” said Jatia. “But we want uniquely McDonald's products. For example, we don't anticipate making a McDosa, but we have a Spicy Paneer burger. That has resonated very well with the Indian consumer. I feel that for global brands, a blend of local and international is the way forward.”

At the same time, Indian entrepreneurs are cracking the fast-food franchise model.

“We wanted to get the fundamentals right before we started expanding,” said Kiran Nadkari the CEO of Kaati Zone, a Bangalore-based chain. “Once you've got the back-end in place, you can expand rapidly. But during those early stages there's not much investment capital. So, for example, I bootstrapped for three years, from 2004 to 2007.”

Mumbai-based Jumbo King — a 43-store franchise business that offers Maharashtra's famous vada pav (spicy, deepfried mashed potato on a bun) — plans to open 250 outlets this year. And Sagar Ratna — a 25-year-old South Indian food chain which bridges sit-down restaurants and fast-food outlets — recently sold a controlling stake in the company to New York-based India Equity Partners for $36 million. It plans to add 200 outlets to its 70 existing restaurants over the next three or four years.

“Even Jubilant took 15 years between when they started and their IPO,” said Nadkari. “Now, the valuation of Jubilant [which this summer nearly matched that of NYSE-listed Domino's Pizza Inc.] is showing investors that anything that's touching Indian consumers is hot, and they can get extraordinary returns from this.”

That makes India a burgeoning fast-food paradise — where you can get a six-course Rajasthani “thali,” or set meal, in 5 minutes flat, and then dash up the stairs or across the street to top it off with a McFlurry.

But it also means that someday soon, if all goes well, you just might be seeing some of these brands — or at least these flavors — at a shopping mall or street corner near you.

“We already export some of our products to the Middle East,” said Jatia. “We've done a lot of innovation work in vegetarian products, and there's a lot of interest across the McDonald's countries.”

Monday, October 24, 2011

Can a business model made famous by McDonalds revolutionize Indian education?

By Jason OverdorfGlobalPost - October 24, 2011

NEW DELHI, India — In a typical Delhi slum, sewage overflows from the drain alongside the street and scraps of colored paper and empty bottles tumble in the foul wind. Here and there, a spindly boy in threadbare briefs fetches water from the hand-pump and a baby, her eyes blacked with kohl, plays happily in the grime.

It's not an easy place to live. But even here, Ramesh Singh, a bicycle rickshaw driver, opted to send his son, Dhiraj, to a bare-bones private school when a pilot program for school vouchers gave him the chance several years ago.

“You saw when the teacher tested him,” Ramesh said. “He finished class three in government school, and he can't read anything!”

Rich or poor, Indians are abandoning the country's disastrously managed government-run schools in droves. Only about two-thirds of India's school-age children attend classes at all, and the fierce competition for places at private institutes means that waiting lists are enormous and it's difficult to win admission to any without pulling strings.

More discouraging still, because of its demographics India will need to build another 250,000 schools to meet its goal of universal enrollment by 2015. But that means there's a big opportunity, as well, some investors believe: India could well be the first country in the modern world where the business of educating kids from kindergarten through high school is, well, a business. Meet the would-be chain store of education: the Indus World School (IWS).

The school that Ramesh chose for Dhiraj, called R.S. Public School in homage to the legacy of Eton and Harrow, was not part of IWS or any other big corporation. When I visited the place, the paint was crumbling off the concrete walls. Its barred windows give it an aspect more penal than pedantic, and the children in the courtyard were forced to squint and shield their eyes against a fine grit whipped across the compound by the wind.

Still, at $6 a month, it cost less than the voucher that Ramesh received as part of a pilot program run by the Center for Civil Society, and the teachers actually showed up for work. Corporation-run chain schools would institute higher standards — perhaps even pioneering the franchise model in education.

"India needs entrepreneurs and organizations who are willing to build a scalable execution model of schools," said Satya Narayanan, chairman of Career Launcher. "In terms of numbers, these could translate into a chain of hundreds of schools over a five to seven year period."

With 14 schools in operation, mostly in second-tier cities but also including five rural schools, Indus World School has made a good start.

Earlier this year, the company secured second round financing from Gaja Capital Partners and sold an additional, undisclosed stake to Housing Development Finance Corp. for around $10 million — suggesting that the snowball is beginning to roll downhill. According to Narayanan, IWS hopes to operate 75 schools with over 40,000 students in five years time, which could pave the way for a wave of followers.

According to the entrepreneur, at least a dozen of India's large corporations are discussing similar ventures or investments. But the blue ocean market — 250,000 schools! — means he won't need to worry much about competition for bodies.

Nevertheless, Narayanan aims to make sure innovation isn't limited to the business model.

The company is steadily developing its own intellectual property for the curriculum, with a focus on age-appropriate linkages to career aspirations and higher education goals — music to the ears of middle-class Indian parents.

And the connection with Career Launcher — a test prep and college admissions advisory company that serves 100,000 from 225 outlets — ensures that IWS understands its target customers and their goals.

Can for-profit chain schools really step in where the state has failed — especially for students like Dhiraj Singh, whose parents can't afford to pay more than a pittance?

Studies of tiny, grassroots private schools and school vouchers suggest that the answer may be yes. So far IWS, like most elite Indian schools, offers scholarships for only a few hundred students. But the gathering momentum of the country's recently passed Right to Education law (RTE) could free up funds for private players.

"The RTE needs to be given an operating framework from the current 'intent' state," said Narayanan. "We can contribute immensely to [uplifting the poor] in just a generation if we can implement RTE smartly!"

Wednesday, October 12, 2011

NEW DELHI, India — When one of India's largest real-estate developers opened DLF Emporio — an exclusive shopping mall devoted to fashion designers and international luxury brands — the mall charged would-be patrons a stiff fee just to get through the doors.

The charge was about the equivalent of a week's salary for many Indians. The customers poured in anyway.

These days, the mall doesn't charge admission. But from the looks of things, it could still get away with it.

Even as the government debates whether 32 rupees a day (or about $0.65) is enough to survive on, the sellers of the world's most expensive and ostentatious brands are doing a booming business in India — a land whose most cherished idol once dressed in a loincloth stitched out of cotton thread he spun himself.

“The traffic in the mall has increased incredibly, because it's one of its kind in India,” said a salesman at Louis Vuitton's Emporio outlet. “We have all the luxury brands in a single location. That's a big advantage.”

Louis Vuitton, Ermenegildo Zegna and company aren't just for socialites and Bollywood stars anymore. Luxury retailers in New Delhi say that in India's major metropolitan cities, the market has expanded to include people from all professional backgrounds, and India's growing, and aspiring, middle class.

“We have a number of customers who come in to experience the store, even buying a belt or a shirt,” said a saleswoman at Ermenegildo Zegna. “We have a mix of customers. Yes, we do have lawyers who are looking for a business suit, but there are also people who need formal wear for social occasions.”

Clearly, the days when Mohandas Gandhi urged Indians to spin their own yarn and sew their own clothes are long gone.

Despite the economic downturn of the past year, India's market for luxury goods grew 20 percent last year to reach around $5.8 billion as top brands penetrated second-tier cities like Gurgaon, Pune, Chennai and Hyderabad, according to a new study conducted by the Confederation of Indian Industry (CII) and the global consultancy AT Kearney.

As the Hindu festival of Diwali approaches, and India enters the busiest shopping season of the year, CII and AT Kearney forecast that the country's luxury market will grow to $14.7 billion by 2015, despite continuing problems with infrastructure and curbs on foreign investment, the report said.

That's because even though the economy has slowed somewhat as the central bank works to rein in inflation, consumer confidence in India remains at an all-time high. In a recent survey conducted by Mastercard, for instance, more consumers in India were planning to buy luxury goods over the next year than in any other country in the Asia Pacific region, apart from Singapore — where the per-capita income is more than ten times higher.

“The kind of spending power people have is expanding, so Armani and Gucci is no longer a dream,” said Bhauya Nagpal, a salesman for Jimmy Choo.

According to CII and AT Kearney, jewellery, electronics, cars and fine-dining grew faster than expected, while apparel, accessories, wines and spirits have continued their strong growth. The market for jewelry, for example, grew 30 percent, compared with an expected 20 percent jump, while the fine-dining segment grew 40 percent versus expectations of a modest 10 percent blip.

That makes India the surprising darling of retailers combatting flagging sales in their traditional cash-cow markets in Europe and the U.S. Already, nearly all of the world's luxury brands are competing for a slice of India's new wealth, though currently the law limits foreign investment in single-brand retail businesses to 51 percent. Retailing experts say global brands will launch some 200 stores devoted to luxury brands by 2020.

Rolls-Royce sold 80 cars here last year, while Ferrari entered the market in May.

Zegna has tapped the haute Indian wedding market with a special “guru collection” of Nehru suits — named after Jawaharlal Nehru, India's first prime minister and the architect of its socialist economic policies — that run around $3,500. French apparel-maker Hermes unveiled a new range of limited-edition saris starting at $6,000 a pop over the weekend.

And even Paris Hilton recently visited the country to launch a luxury boutique that will sell her personal line of fragrances, handbags and apparel in Mumbai.

So what would Nehru think of the country's enthusiastic embrace of ostentation? Not so much, one expects. With more than 3 million wealthy households, India now has more affluent families than any European country, but the annual average income remains around $3,500. That's just enough for Zegna's take on Nehru's signature suit.

Thursday, October 06, 2011

SURAT, India — This summer, the authorities in Surat, the commercial capital of the state of Gujarat, arrested two smugglers attempting to sell nearly a million dollars in so-called blood diamonds.

Close on the heels of similar busts, the arrest again raised fears that the chaotic conditions making this small city on India's Arabian coast the world's new diamond-polishing hub may also make it one of the weakest links in the fight to stop overlords from financing armies with the precious stones.

“Every month, diamonds are coming from Zimbabwe without a Kimberley Process Certificate (KPC),” said Kirti Shah, an elected official of the Surat municipal corporation who is also a diamond trader.

“But I'm the only person in the diamond market who will talk about it openly.”

Once known for processing small, cheap stones, Surat has gradually replaced Antwerp as the center for cutting and polishing nearly all of the world's rough diamonds — as local traders have invested heavily in technology and infrastructure to compete for large, flawless stones. (Antwerp remains a go-to for shoppers.)

Yet even as local factories have installed cutting-edge, laser-guided planning and marking software and the latest grinding and polishing machines, Surat's main advantage over polishers in Belgium and Israel remains its cheap labor force and a centuries-old, trust-based system of trading that keeps transaction costs low.

Every day, trading houses small and large rely on couriers to hand-carry millions of dollars worth of diamonds to Surat from Mumbai on local trains — with no protection but anonymity.

In Surat's markets, diamonds change hands on the street and zip back and forth across the city by motorcycle as traders haggle over prices. When a sale is finally made, nine times out of 10 the deal is done in cash, with nothing but a hand-written chit to record the transaction.

Last year, $30 billion worth of stones passed through this city, according to the Gem & Jewelry Export Promotion Council. That's 11 out of 12 of the world's diamonds.

And while there are no reliable estimates, it stands to reason that if nearly all of the world's legal diamonds make their way here, a good portion of the conflict diamonds do, too.

“It's a very big market,” said a senior investigator in the local branch of the directorate of revenue intelligence — the outfit responsible for combating smuggling, counterfeiting and other economic crimes. “So many brokers are trading on the pavement itself. It's very difficult to monitor.”

Diamond traders say that local press reports claiming that conflict diamonds comprise 15 to 30 percent of the market (citing unnamed sources) have exaggerated the problem. But with some 5,000 polishing units — around 1,500 of them tiny cottage industries scattered throughout the state — it's patently impossible to track each and every stone.

“This not a problem only for Surat, or only for India. It's a problem around the world,” said Damji Mavani, secretary of the Surat Diamond Association, which conducts seminars and other programs to raise awareness about conflict diamonds.

According to the revenue intelligence officer, who is not authorized to be quoted by name in the media, Indian revenue officials have only been monitoring the diamond trade since 2008, because diamond imports are not taxed.

Since the authorities began tracking the business, however, they have already busted traders with three consignments of blood diamonds, each valued around $1 million or more. In September 2008, revenue intelligence officials arrested two Lebanese men — Robai Hussain and Yusuf Ossely — with 3,600 carats in rough diamonds worth around $875,000 at the time.

This April, they caught two Indians — Jora and Prema Desai — allegedly attempting to sell 48,000 carats of conflict diamonds from Zimbabwe worth more than $2 million. And in August, Indian authorities arrested an Indian trader named Pravin Ajudiya and a Congolese national named Jean Tshinaga with some 10,000 carats in alleged blood diamonds valued around $950,000.

Writing in India Today magazine, journalist Shantanu Guha Ray recently cited local traders as saying that such conflict diamonds routinely come to Surat on dhows sailing from Dubai. But in each of the three cases broken by Indian officials, the alleged smugglers hand-carried the rough stones on international flights and were caught because of tips from local informants, the senior revenue official said.

“There may be many such carriers,” the revenue intelligence officer said. “But unless and until we get information, we cannot catch them.”

For opponents of the trade in conflict diamonds, India's frontier-style market presents a serious problem, mainly because the entire interdiction system hinges on documentation.

Since 2003, the Kimberley Process Certification Scheme has made it mandatory for diamond exporters to document every shipment of rough stones to certify that they do not come from conflict zones. According to the Diamond Trading Corporation — a subsidiary of De Beers, the world's largest diamond company — the scheme has ensured that blood diamonds account for less than 1 percent of the global trade, compared with 15 percent before there was any monitoring system.

But others are less sanguine about the certification scheme's success. Once a diamond is cut and polished, there's virtually no way to trace its origin, though a handful of retailers have tried to set up a method that would allow buyers to do so.

Meanwhile, the main market for cut diamonds is increasingly moving to countries like India and China, where the idea of “ethical consumerism” is even less common than it is in richer nations.

Last year, as the U.S. economy languished, around 70 percent of India's gem and jewelry exports went to diamond traders Hong Kong and the United Arab Emirates.

“Essentially, illicit diamonds that bypass the early stages of the Kimberley Process (such as those from Gabon and Cameroon, or those smuggled from Cote d'Ivoire, Venezuela, or Zimbabwe) can be laundered through willing companies in the cutting and polishing industry,” Ian Smillie, chairman of the Diamond Development Initiative, wrote in a recent report.

“Arrests and the seizure of uncertified rough diamonds in the United States, the European Union, India and elsewhere demonstrate what may be the tip on an iceberg, one that the [Kimberly Process] has been unwilling to acknowledge or deal with.”

Non-governmental organizations like Diamond Development Initiative, Amnesty International and Global Witness have repeatedly criticized the Kimberley Process for failing to plug loopholes in the system, and, worse, for failing to crack down on offenders like Venezuela, Guinea, Lebanon and Zimbabwe.

But faith in the Kimberely Process has recently fallen to a new low. Activists walked out of a key meeting in June in what Global Witness termed a “vote of no confidence” triggered by a deal to allow Zimbabwe to sell diamonds from its violence-plagued Marange fields that “does not contain sufficient checks and balances to prevent substantial volumes of illicit diamonds from entering the global diamond supply chain.”

According to India Today, the deal allowed the Surat Rough Diamond Sourcing India Limited, a consortium of 1,500 diamond traders, to directly source rough diamonds from miners in Zimbabwe, making it more difficult for the Kimberley Process to track the stones.

Last year, Surat Rough Diamond Sourcing India Limited and the Zimbabwe government signed an agreement for the regular supply of diamonds worth $1.2 billion a year in exchange for training Zimbabweans in Surat's diamond-processing units, the magazine reported in May.

Many of those stones will doubtless wind up in Surat's “Mini Bazaar” — a small outpost compared to the main market in Mahidharpura, where there are some 50,000 traders, according to a local broker.

On a typical weekday afternoon here, hundreds of diamond brokers line the street. Clad in the standard cheap polyblend slacks, button-down shirt and rubber sandals, they sit on the back of motorcycles and on stoops, lean against shopfronts or squat on their heels, farmer-style, on the curb.

Monday, October 03, 2011

Why India can't leverage the US-Pakistan spat, and what it means for regional stability.

By Jason OverdorfGlobalPost - October 3, 2011

Editor's note: The idea for this article was suggested by a GlobalPost member. What do you think we should cover? Become a member today to suggest and vote on story ideas.

NEW DELHI, India — Indian diplomats and military strategists no doubt felt a twinge of satisfaction last month, when the just-retired chairman of the U.S. joint chiefs of staffs finally came out and accused Pakistan's spy agency of employing terrorist groups.

New Delhi had long hoped for a breakdown of ties between Washington and Islamabad that would put an end to billions of dollars in U.S. aid that it says Pakistan uses primarliy to amass weapons against India.

But as much as New Delhi may have hoped and prayed for such a rift, when the United States succeeded in patching things up following Adm. Mike Mullen's accusation that Pakistani intelligence was using the Afghanistan-based Haqqani terrorist network to wage a “proxy war” against U.S. forces, the sigh of relief was almost audible.

What India wants above all, is for Pakistan to stay in check. And the fact of the matter, experts say, is that the United States makes that possible.

“The unraveling of U.S.-Pakistani ties in recent days posed huge dilemmas for India,” said Harsh Pant, an academic with the Department of Defence Studies at King's College London.

It doesn't take much reading between the lines to see that whatever satisfaction India may have derived from hearing its own frequently repeated refrain from the mouth of America's highest-ranking military officer, it is more concerned about Pakistan being suddenly unleashed than it is about Islamabad's influence in Afghan peace talks or its diplomatic role in post-war Kabul.

That's because even though New Delhi has for years complained that the United States has overlooked Pakistan's alleged use of terrorist groups to wage a so-called proxy war against India, beginning with the Kargil conflict in 1999 and increasingly since Sept. 11, 2001 the United States has offered India its only leverage, however limited, over an increasingly reckless enemy.

“While there might be a sense of schadenfreude in certain circles in India, over the longterm [a rift between the United States and Pakistan] complicates the strategic realities for India,” Pant said.

Though “proxy war” has been its pet term for the Pakistan's Inter-Service Intelligence's activities for decades, New Delhi did not seize the moment following Mullen's statement to urge Washington to sever its military alliance with Islamabad. Rather, it issued a call for an extension of the U.S. engagement in Afghanistan, which makes breaking that alliance impossible.

"For peace, stability and security in Afghanistan, it is imperative that the ongoing transition must be linked to the ground realities rather than rigid timetables,” India's Permanent Representative to the United Nations Hardeep Singh Puri told fellow delegates in the aftermath of Mullen's statement.

“This, the international community in its hurry to withdraw from a combat role in Afghanistan, will ignore at its own peril.”

Enemies since the bloody Partition that carved two independent states from the erstwhile British India, India and Pakistan have fought four wars since their creation in 1947 — three times over territory in Kashmir and once as part of modern Bangladesh's fight for independence from Pakistan.

But even though India has never lost, Pakistan has never given up. The region remains one of the world's hot spots, with many other conflicts threatening to boil over.

More recently, all eyes have been trained on the subcontinent since a terrorist attack on the Indian parliament and a subsequent nose-to-nose confrontation between Indian and Pakistani forces on the border raised fears of the world's first nuclear war in 2002.

But New Delhi's retreat from the brink then and its refusal to mobilize troops again after the November 2008 terrorist attacks on Mumbai suggest that another full-scale war between India and Pakistan is far less likely than once believed.

The reasons are simple. India's growing military superiority virtually rules out an invasion by Pakistan, particularly since Beijing has more or less made clear that its support begins and ends with looking the other way with regard to Islamabad's employment of terrorist groups to nip at India's flanks.

And Pakistan's substantial nuclear arsenal, superior missiles and well-equipped air force act as a more than sufficient deterrent to any military action by India — whatever the provocation.

“India has not shown interest in fighting, Pakistan or anybody. It has reacted to provocations rather than seeking to resolve its 'Pakistan problem,'” said Sunil Dasgupta, co-author of "Arming Without Aiming: India's Military Modernization."

By almost any measure, today Pakistan's military prowess simply does not compare with India's, according to figures tabulated by Global Firepower.

At $36 billion, India's defense budget is nearly six times Pakistan's expenditure of $6.41 billion, and if it came to financing a shooting war, New Delhi has $284 billion in foreign reserves to Islamabad's paltry $16 billion.

In terms of boots on the ground, India has a standing army of 1.33 million soldiers, versus Pakistan's 617,000. Its tanks and other land-based weapons outnumber Pakistan's by 75,000 to 16,000. Its navy is nearly 10 times larger, and its 2,462 military aircraft are almost double Pakistan's 1,414 — though some say Pakistan's pilots are both superior and better equipped, thanks to decades of American military aid.

There's only one problem, says G. Parthasarathy, a former Indian ambassador to Pakistan. And that's what America is only just beginning to confront.

“I'm glad that reality has dawned, rather late in the day,” said Parthasarathy, in response to Mullen's statement. “But [the Pakistanis] are not going to give up their jihadi assets. If you choose to keep your head in the sand, there's nothing we can do about it.”

Pakistan's singular focus on India — some might call it an obsession — and its willingness to employ any means necessary to frustrate its nemesis mean that it remains a serious threat for India.

“India needs to deploy a substantial number of its forces along the Sino-Indian border, thereby attenuating its capabilities,” said Sumit Ganguly, a professor of political science at Indiana University.

“Separately, Pakistan has long adopted an asymmetric war strategy against India [by providing covert aid to terrorist groups] and conventional capabilities are not especially helpful in dealing with such a strategy. Also, because of Pakistan's nuclear weapons, India cannot respond using conventional forces.”

Things could well get worse before they get better. According to Pakistan's Ahmed Rashid, author of "Descent into Chaos: The United States and the Failure of Nation Building in Pakistan, Afghanistan, and Central Asia," Pakistan now faces economic strife, deadly ethnic tensions and an internal problem with the Islamic extremists it once fostered.

Meanwhile, civilian control over the military is at a low ebb. “Pakistan is on the edge of a precipice and one faulty step — either by the Americans or the Pakistan army — could plunge an already beleaguered state into meltdown,” Rashid wrote in a recent column for the BBC.

That leaves an ever-reluctant India — still punching below its weight, even as it seeks a permanent seat on the U.N. Security Council — on the edge of a precipice, too.

“In the longterm, obviously, India and the U.S. are headed for strategic, economic, and social convergence,” said Dasgupta, a fellow at the Brookings Institution. “The policy challenge for the U.S. and India for some time now has been to figure out how to get from the short-term divergence over Pakistan to the long-term state of natural alliance.”